Sales is a vital factor in determining the efficiency of an existing business dealing with customers. Different sectors like retail, healthcare, logistics, etc. depending on the sales metrics to track their company’s progress in achieving its goals. Revenue generated through sales is a direct representation of the amount obtained from selling products and services.
Changes in sales determines a company’s success or failure among its peers. However, keeping track of mere raw sales data would not give the desired broader picture. This is because due to many factors, sales data is not constant throughout a fixed period and is actually fluctuating. Rather, a more precise figure is needed which can smooth out the differences in data and help make relevant comparisons. This lays the foundation for average sales.
While every organization has its own benchmark to define average sales, it is no hidden fact that it is the most important aspect for every business owner to be aware of Average sales can be measured in terms of sales per period or sales per customer.
3 Reasons Why Calculating Average Sales Is Important
Before moving forward towards different approaches in calculating average sales, it is imperative to understand the importance of average sales in executing a successful business. Finding your company’s average sales and comparing it to previous data can help realize any possible outliers or changes. This in turn helps to make vital business decisions.
Given below are few important benefits of calculating average sales:
Firstly, business owners can easily trace efficiency of existing sales strategies and/or marketing campaigns in increasing customer connectivity and generating more leads.
As per a recent report by Salesforce, 66% of sales teams prioritize customer satisfaction as top KPI apart from team quota met.
Secondly, calculating average sales with respect to customers gives a clear insight into customer spending at a specific point. Comparing this data to historical data can assist in taking vital decisions like strengthening the existing customer base or looking out for more prospective buyers.
As per Salesforce, about 81% of sales representatives emphasize on having a interlinked view of data throughout the customer journey.
Thirdly, average sales are also an important factor to determine efficiency of different teams or divisions in an organization. Comparing existing monthly or daily sales against historical average sales gives a clear picture of a team’s performance. Based on the performance, business owners can take important decisions on whether to allocate more budget, trim existing resource size, or provide more support.
2 Ways to Calculate Average Sales
As stated above, average sales can be determined in terms of sales for a fixed period or the sales figures relative to a single customer.
Average Sales with Respect to a Time Period
Average sales can be calculated for a given time-period to monitor a business’s progress over a year. It is determined by length of the period and the total sales value. Length of the period can be stated on a smaller scale like daily or weekly, or on larger scale like monthly, quarterly, or annually.
Figure shows average sales calculated for a year (2nd quarter of last year to 2nd quarter of current year).
To calculate average sales over a certain time period, you have to first determine total sales value for that period. The next step is to divide the total figure by the chosen interval. For example, if chosen time-period is one month, you need to calculate total sales over a year and divide by total number of months (12). This gives the monthly average sales. Similarly, daily average sales can be calculated by dividing total monthly sales by total number of working days in a month.
Average Sales per Customer Basis
Calculating average sales with respect to a specific time frame is beneficial to assess a company’s performance on a broader aspect. However, on a more microscopic point of view, an increase in sales over a time-period is of little or no importance if value of sales per customer is decreasing. This can have a detrimental effect on a company’s revenue.
Figure below shows average sales calculated per customer using BIRD. Value is calculated as an aggregation.
Average sales can be calculated in terms of transactions done for each customer. This method involves determining total sales value for a day (or month, quarter, or year). The obtained resultant value is divided by total number of transactions to obtain average sale per customer.
4 Ways to Increase Your Average Sales
Increasing average sales is undoubtedly an important aspect to boost a company revenue and enhance the business. Given below are few important tips for business owners to increase their average sales:
- Be more customer friendly by allowing the consumers to customize their final product before purchasing.
- Focus on selling more valuable products (even if expensive) instead of giving importance to sell cheaper products.
- Upgrade yourself regularly on latest customer trends and regularly update the existing offerings as per customer needs.
- Be a valuable resource to the customers in highlighting the important aspects of your product compared to other competitors in the market.
Things in a Nutshell
Despite its vital importance and essence in monitoring a company’s success rate, average sales are not the only parameter to track sales effort. Other key performance indicators like average revenue per unit, sales per representative, etc. is equally important to give actionable insights.
Want a visual way to calculate average sales or other KPIs through interactive dashboards? Try exploring BIRD’s full stack data management augmented analytics platform.